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Since I got a lot of qs about $1k investment checks, I want to unpack this in today's thread.
Who is writing $1k investment checks? Why? Aren't angels rich? And who is taking these checks? And why? Isn't it a waste of time?
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Who is writing $1k investment checks? Why? Aren't angels rich? And who is taking these checks? And why? Isn't it a waste of time?
Read on >>
1) First some context - this is the thread that sparked all these qs: https://twitter.com/dunkhippo33/status/1397253742886457346
2) Taking a step back, where did all of this start?
It actually started more than a decade ago when I noticed so many friends running around writing $1k angel checks. I'd always thought you needed to be super rich to be an angel, but that isn't the case.
It actually started more than a decade ago when I noticed so many friends running around writing $1k angel checks. I'd always thought you needed to be super rich to be an angel, but that isn't the case.
3) Why were they writing $1k angel checks? My friends didn't have much liquidity because like me, they were also startup founders. But everyone wanted them on the cap table, because they were founders. They were great for advice and connections and just getting out of the way.
4) Moreover, their startups were valued high enough to make them accredited.
I'm no lawyer - so this is not legal advice - but others have mentioned that if you've raised at $5m cap & own 30% of your co, you're worth $1.5m & are accredited.
I'm no lawyer - so this is not legal advice - but others have mentioned that if you've raised at $5m cap & own 30% of your co, you're worth $1.5m & are accredited.
5) This is how it's very possible to be worth a LOT but not actually have a lot of cash.
And simultaneously, as a founder, may want to take a small check from this type of person.
And simultaneously, as a founder, may want to take a small check from this type of person.
6) In addition, small checks lead to big checks. Having someone as a credible champion really opens doors.
Champions do introductions and put their reputation on the line in promoting you to their friends. This flywheel effect is something that most ppl miss.
Champions do introductions and put their reputation on the line in promoting you to their friends. This flywheel effect is something that most ppl miss.
7) I talked about this flywheel effect in generating momentum for even our VC fundraise. We even took checks as low as a few thousand dollars...on an $11.5m fund! https://elizabethyin.com/2018/12/19/how-i-raised-my-11-5m-vc-fund/
8) Our portfolio founder @fitzrocks wrote about this phenomenon for his fundraise as well. He even mapped out what checks led to other checks.
His $5k investor effectively brought in hundreds of thousands of dollars. https://www.freshpaint.io/blog/anatomy-of-a-seed-round-during-covid-19
His $5k investor effectively brought in hundreds of thousands of dollars. https://www.freshpaint.io/blog/anatomy-of-a-seed-round-during-covid-19
9) Often ppl say that smaller checks are harder to close than larger checks.
I think this really depends on who you are talking to.
In my experience, it's been the opposite. Especially in raising from other entrepreneurs in the ecosystem who understand the importance of speed
I think this really depends on who you are talking to.
In my experience, it's been the opposite. Especially in raising from other entrepreneurs in the ecosystem who understand the importance of speed
10) Ppl often say that smaller checks are harder to manage. Perhaps 10 yrs ago that was the case.
These days you have things like @AngelList 's rollup vehicles or syndicates that make it dead simple to take smaller checks and manage those investors.
These days you have things like @AngelList 's rollup vehicles or syndicates that make it dead simple to take smaller checks and manage those investors.
11) Smaller checks also increase the pool of investors you can raise from in the ecosystem.
In small towns were there are only 10 angels, if you strike out, you're stuck. In Silicon Valley, there are literally tens of thousands if not hundreds of thousands of microangels.
In small towns were there are only 10 angels, if you strike out, you're stuck. In Silicon Valley, there are literally tens of thousands if not hundreds of thousands of microangels.
12) How can you find startup investment opportunities at these check sizes?
One way (biased here) is through http://hustlefund.vc/angelsquad ! cc @b_nicks11
We help enable angels to invest alongside us and other professional investors.
One way (biased here) is through http://hustlefund.vc/angelsquad ! cc @b_nicks11
We help enable angels to invest alongside us and other professional investors.
13) Another way is to just ask. There have been SO MANY TIMES when a founder has told me the minimum is $25k and I've just told them, "Hey, I can't do that but I can do $1k. I won't be a pain in your side and can open doors." And you know what, the minimum is dropped.
14) People don't realize that as an investor you are often selling yourself and why someone should take your $$. And that is def what a smaller angel does all the time.
15) tl;dr Small angels are able to fund many more companies because the smaller check sizes are more doable for most ppl.
Many of these smaller checks in SV are from other entrepreneurs who are value-add in other ways.
There are great ways to manage small checks.
Many of these smaller checks in SV are from other entrepreneurs who are value-add in other ways.
There are great ways to manage small checks.
